The New World of Electric Power Microgrids

Global Market to Triple by 2020; Hospitals Among Key Investors

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Posted: Wednesday, November 6, 2013 4:24 pm

Microgrids that provide localized self-generation of electricity have been around for decades. However, the microgrid of today is new in how it continuously manipulates its load in order to fiscally optimize generation. It also provides improved security and reliability in the event of an interruption in the external grid (the macrogrid), due to natural or manmade disruptions.

While there are a variety of policy, regulatory and economic challenges to overcome, many factors suggest microgrids will play an expanding role in the nation’s power generation portfolio in the years to come.

Energy efficiency and power quality stability are also among the benefits of microgrids. They are well suited for the use of renewable sources and energy storage, and thus support carbon and greenhouse gas reduction goals. By matching renewable generation to demand on the load side (locally) and utilizing energy storage, microgrids help reduce the variability in renewable generation delivered to the grid.

A microgrid utilizes multiple electrical generators placed in strategic locations and adjusting load with its associated controls. It can operate as an exporting generator or as an autonomous grid, acting in parallel to the macrogrid.

Microgrids employ sophisticated technology architecture and controls that change the loads in response to optimization in generation. They can also disconnect from the external grid if there are disruptive events in the regional transmission grid. Microgrids are designed to provide electricity and heat generation, if needed, for a particular mixed-use community that allows load shed to improve efficiency and overall reliability.

The economic case for microgrids has gained renewed attention because of the energy reliability and security benefits of distributed generation. As a potential self-generator, the upfront investment might seem daunting and can be a barrier to entry. One key developer of microgrid power generation resources and management software estimates that developing a microgrid to support a 40 MW load can require a million dollar investment. Although large-scale energy storage has been cost prohibitive, the smaller scale of microgrid energy storage, efficiency improvements, and the ability of local distribution networks to manage renewable intermittency are expected to improve the economics.

In addition to enhanced energy reliability and security, the economic justification for microgrids includes energy savings, efficiency improvement and reduced emissions. Because there are numerous technological options for generating resources, energy storage, smart meters, transformers, control system architecture and communication networks, microgrid planning is a complicated exercise in investment optimization. The impact of each of these choices on the system cost and return on investment (ROI) might not be obvious. There are cost/benefit analysis models that can assist in evaluating the financial decisions for a range of technologies, including generation, energy storage, building efficiency, load automation, thermal load management, distributed system infrastructure, telemetry and controls.

There are meteorology optimization tools that allow the user to evaluate the cost, ROI, emissions, reliability and occupancy rate (for mixed use developments) while evaluating uncertainty and risks associated with climate, technology improvement costs, energy prices and changing demand. Such optimization tools help identify short-term and long-term investment approaches, track energy balances; and quantify the duration of support for critical loads. In addition to making the business case, microgrid optimization models also can inform policymakers by comparing the impacts of different rate structures, incentives and new technologies in the industry.

Despite the cost barriers, a recent survey of smart grid executives commissioned by Institute of Electrical & Electronics Engineers (IEEE) reported that hospitals and healthcare institutions were the largest expected market for microgrids during the next 5 years. The report concludes that private- and public-sector funding for microgrid, distributed generation (DG) and grid-level storage projects would advance cost-effective application of these technologies. By 2020, the global microgrid market is projected to reach $13.4 billion, a nearly three-fold increase from 2012 investments.

Policy and regulatory requirements complicate microgrid development and can make the economics less than favorable. Issues such as regulations governing generating asset ownership; classification of a microgrid as an electrical or thermal utility under state laws; incorporation of the utility’s legal responsibility as the provider-of-last-resort (POLR), grid interconnection, transmission charges, right-of-way requirements, state policies on net metering and feed-in tariff structures for renewable generation present legal and regulatory hurdles. New York State conducted an extensive assessment of regulatory definitions and legal requirement standards for microgrids and developed a roadmap for facilitating the construction in the state. The comprehensive report serves as a valuable tool for developing state-level policies.

In today’s ever changing electrical grid environment, smart grid control technology brings new opportunities and challenges into the marketplace. The technology transition in the energy industry is taking shape in the context of digitization and communication, variable control areas and controllable loads.

Through the use of real-time tracking of the load and end use visibility, the grid can be optimized using a dedicated operational communication infrastructure. The tracking delivery and end-use metrics provide the feedback to ensure its effectiveness. The distributed control system architecture is developed to provide grid flexibility and stability at the same time.

The control area can span from large grid control areas to locally balanced multi-directional grids. This requires real-time estimation of the transmission and distribution grid parameters. This type of control area coordination is essential to the microgrid owner. The microgrid in conjunction with smart grid technology provides efficient multi-directional power flow of locally dispersed and variable generation.

Through the use of demand-side management, the microgrid owner can adapt loads to generation availability and locale. The time of usage (TOU) and price-to-device programs work well in this environment. The microgrid owner can configure the load and adapt the kilowatt per hour (kWh) demand utilizing a pricing and conservation structure.

Electricity costs can be minimized by balancing microgrid electrical assets with macrogrid electrical supply and controlling demand load. Through supervisory control and data acquisition (SCADA) systems the microgrid owner can have real-time control of generation, load and energy storage.

The primary purpose of the SCADA system is to monitor, control and alarm plant or regional operating systems from a central location. While override control is possible, it is infrequently utilized, but control set points are quite regularly changed by SCADA.

There are three main elements to a SCADA system: Remote Telemetry Units (RTUs), Human Machine Interface (HMI) and communications. Each RTU effectively collects information at a site, while communications bring that information from the various plant or regional RTU sites to a central location, and occasionally returns instructions back to the RTU. The HMI displays this information in an easily understood graphics form, archives the data received, transmits alarms and permits operator control as required. Communication within a plant will be by data cable, wire or fiber-optic, while regional systems most commonly utilize radio.

The microgrid DG provides enhanced reliability and is able to provide frequency control, voltage support, and power quality stability. These three parameters, as well as power, are the major factors to be controlled. Ideally, the microgrid would utilize a predictive program with regard to weather and expected demand.

As national renewable energy integration efforts expand, technology deployments of large-penetration microgrids will mutually support each other across the macrogrid to meet their goals more economically and with less risk.

A new utility business model must evolve in response to microgrid emergence. Central renewable generation has a limited future if large-scale, cost-effective storage is not found soon. When commercial, the model will embrace utility-owned microgrids.

Currently, utility response to microgrid opportunities has been tepid. This is largely due to a lack of established microgrid standards. In 2011, IEEE published “Guide for Design, Operation, and Integration of Distributed Resource Island Systems with Electric Power Systems,” and the Federal Energy Regulatory Commission (FERC) proposed implementation standards for demand response, which provided much needed engineering protocols. The utilities that are on the forefront of microgrid development are working with developing nations, multi-state corporations and rural electric cooperatives. These organizations either have a large aggregated load or have to work in service areas that do not have the option of connecting to a larger transmission grid.

Because of the regulatory and economic challenges, microgrids will likely remain a niche application over the next several years. But as the costs for energy storage, renewable generation, and smart grid automation become more competitive, microgrids will play an expanding role in the quest for energy fiscal optimization, security and reliability.

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